Although it is popularly known as a global predicament and India’s biggest, yet nothing is being done about it. I am asked almost everyday, in particular by my online friends on Facebook and other online communities, to write on it. Yes, I am referring to black money and the black hole that our reprehensible politicians, bureaucrats and businessmen collectively have created of this nation. To an extent that there is no other nation which has been looted by its own unscrupulous countrymen, as much as India has been shamelessly looted; and this insidious saga continues on an everyday basis. As per very well researched reports, Indians have stashed away as black money abroad a total amount of money, which is more than our entire national income. The figures are to the tune of an unbelievably staggering $1450 billion of unaccounted money in various foreign banks! And India happens to be the largest account holder of black money abroad. At the second place is Russia with less than a third of the Indian amount at around $470 billion, with UK coming at the third place with $390 billion. The fourth country, Ukraine, has only $100 billion, while at the fifth place is China with $96 billion looking comparatively so clean and holy. That’s the unbelievable comparative corruption that our political and business class have been a part of. But then, all of this did not and cannot happen overnight. In fact, for the past sixty years, we have successfully created a system which has allowed people with unending appetite for wealth to systematically siphon off money to closely-held secret accounts in Switzerland and various tax havens globally.
The inculpated seeds of this were sowed during the second five year plan and in such a flawed and inauthentic manner that corruption almost got institutionalized, and generation of black money became a natural extension. In an attempt to make an industrialized India which is self sufficient, the policy framework was drafted around industrial licensing, price controls and import barriers. Though the framework was logical on paper, and had great pedigree of success in erstwhile USSR in the 1920s under the leadership of Stalin – a similar model was simultaneously showing results in China as well under the aegis of Mao – what we forgot was that our pimply political setup was unlike that of the then USSR or China. As a result, though the vainglorious plan was to make India self sufficient, our scabbed policies heretically only went on to make select industrial houses, bureaucrats and politicians self-sufficient at the cost of and to the nation. Industrial licenses were doled out to industrial houses that did not have any track record or any other credibility, other than their proximity to the underhanded political leadership. Ergo, incompetent industrial houses were awarded licenses; and on account of lack of competition, they kept ruling through their quisling political connections and illicit black money. Political parties, in order to keep themselves in power, increasingly got criminalized; and this even got financially supported by funding from the industrial houses. With time, the criminalization in politics gained gigantic proportions and an evil nexus between business, criminalized politicians and the rentier class babus, ran mayhem across the country, making corruption a way of life in India and making national loot their personal obsession!
Amongst all the three classes mentioned above, it is the gangrened political class which has been the biggest offender as not only have flagitious politicians plundered for themselves but they have also created an enabling looting environment for the enterprise to thrive. Estimates published by various media groups reveal that in 1967-68, black money circulating in the country was Rs 3,034 crores, which increased to Rs 46,867 crores by 1979. In simple words, from 9 per cent of GDP in 1968, black money accounted for 49 per cent of GDP by the end of 1979. And mind you, that was thirty years back! And it is no secret that both the frequency and magnitude of scams have only multiplied with every passing year! Back in the 1980s there were just eight scams; this figure grew to 26 in 1990s, and now this has seen an exponential increase to touch a figure of 150! Such has been the abysmal and ulcerated level of ethics that the vice-laden political class has left no stone unturned to extract their pound of flesh from every possibility, so what if it is animal fodder, coffins of soldiers, or real estate meant for martyrs. So if on one hand there is this feloniously devious Chief Minister who sells the resources of our most mineral rich state as if the same were his own, then on the other another bootlegging Chief Minister goes about misappropriating residential flats which were meant for Kargil martyrs. And if this wasn’t enough, a double-dealing man who considered Indian sports as his personal fiefdom, through CWG, misappropriated tens of thousands of crores. And even if all this was not enough, a knavishly malfeasant politician at the national level, without caring for national security, sold telecom licenses as if he owned them, at an iniquitous price which cost the exchequer and the nation Rs. 1,70,000 crores – with no trace of this money yet. No wonder, when Global Financial Integrity (GFI) in its recent report concluded that around $19 billion is lost in India as black money each year, we all know where the money comes from.
Although as per Transparency International, a whopping 60 per cent of the total black money generated is routed into the electoral process, the obdurate politicians alone do not monopolise this obscene, unending appetite to plunder every bit for their personal gains – they have also systematically created a flaringly vitiated environment wherein even industrial houses can have their own pounds of flesh. Otherwise, knowing the blatantly debauched leakages that repeatedly occur, why would the Indian government still stick to a no-tax-for-long-term-capital-gains policy? Taking advantage of this, degenerate promoters have been raking in crores of rupees by offloading their stake in their own covinous companies and siphoning them off to various surreptitious tax havens across the world! It is almost a known fact that most of this money is getting parked in countries like Mauritius, Cayman Islands, Bermuda, British Virgin Islands or are stacked in banks of Scandinavian or European countries. And now, even a few Asian countries like Thailand, Singapore, Hong Kong and Macau are emerging as new destinations for parking illicit funds for Indians. And why should they not – it is free money for them!
If this is not a reality, then how does one justify that Mauritius ranks first among all countries in Foreign Direct Investment (FDI) inflows to India while its national income is just $8.7 billion, and its investment in the banking sector is just over $1.5 billion? More interestingly, Mauritius has more than 9,000 offshore corporate entities, many of them having roots connected to India. Under Indo-Mauritius treaty, a company resident in Mauritius can sell shares of an Indian company to escape taxes in India as there is no policy of capital gains tax (CGT) in Mauritius – the gain thus escapes tax altogether. Similar are the cases with almost all other nations that have differential taxation. In 2008, around $3,600 million was routed to Singapore and around $2,200 million to Cyprus from India. In April 2009, the Canadian High Commissioner to India acknowledged that against the official Canadian investment into India estimated to be around $239 million, the actual figure would not be less than $10 billion. India loses nothing less than a staggering $1.5 billion collectively, mainly due to individuals trying to dodge taxes back home. Many promoters of Indian companies exploit firms located in tax havens to fraudulently augment their share prices domestically, illegally channelise funds into tax havens and then later bring them back as FDIs and other forms of investments. And if all this is not true, then how do we justify that the total market capitalization of a handful of companies listed in BSE and NSE is more than the Indian GDP? And mind you, a couple of them in this list have market capitalization figures that are almost 25 percent of the Indian GDP!
This saga of blatant extortion and shameless plundering does not just stop here. Whatever is left in the form of putrefied morsels is also being scavenged, starting from the conscienceless babu to the amoral peon, and that too from the poorest of the poor! A study reveals that 50 million BPL (below the poverty line) households pay bribe worth Rs 9000 crores to get their work done. So be it the police, health education, employment in form of NREGA, land records etc – every possible avenue is exploited to extract money for personal gains and then siphoned off to offshore locations! It is so unfortunate that nations like Switzerland are thriving on our money; and today, when they are ready to cooperate, the perfidious government is reluctant to get the black money back and disclose the names of the perpetrators! Understandably so! In fact, nations like Germany went to an extent of paying $6.3 million to LGT group in Liechtenstein for purchasing bank data to track down tax evasion. In 2009, US tied up with the Swiss government in a move that allowed US to access to 4,450 secret accounts in UBS. In spite of 18 years of long struggle, Nigeria managed to get back $700 million. Similarly, Philippines got back $700 million and Mexico $74 million!
It’s time now for India. The government has made a big statement that the black money lying abroad belongs to Indians; and that it will be brought back. Sadly, all this is nothing but mere suppurate lip service. If the government is serious about the issue, it should give a deadline and put an honest breed of people to work independently to get the money back. On one hand, the government claims that they say they will get it all back. On the other hand, while the Swiss government is ready to share the data of money kept in accounts there, the censurable Indian government is quite shamelessly not ready to ask for those details. Clearly, if the government had been serious about this, they could have easily got all the details by now. My question is, what is the reason why the government is not getting the money back? Are they aberrantly waiting for all black money-holders, including themselves, to shift the money to Dubai where the secrecy laws are still very stringent? Evidently, once they have successfully managed that, perhaps then they’ll display ubér haste in asking the Swiss government to reveal all – when the Swiss government will be left with nothing to reveal. The coming times will give the readers the answer. But one thing is for sure. If this jaundiced and venal government doesn’t take action soon, the time is not far away when an Egypt will happen in India. And I hope the peccant people in power are listening.
- 11 February 2011 |
- Dr. Arindam on Indian Economy